“In deciding whether an attorney’s fee is an impermissible overcharge, “The test is whether the fee is ‘”so exorbitant and wholly disproportionate to the services performed as to shock the conscience.“1 But whose conscience?
That used to be the test in California to measure the conscionability of attorneys’ fees. It was once expressly stated in the rules as whether the fees were “so exorbitant and wholly disproportionate to the services performed as to shock the conscience of lawyers of ordinary prudence practicing in the same community.”
It was fun telling non-lawyers about California’s ‘shock the conscience of lawyers‘ test. Will Rogers, after all, famously remarked, “I don’t think you can make a lawyer honest by an act of legislature. You’ve got to work on his conscience. And his lack of conscience is what makes him a lawyer.”
There’s little doubt the ‘shock the conscience’ test sprang from that old reliable “reasonable person” standard — here, the conduct of a reasonably prudent and competent lawyer.
Unfortunately, the current rule for “Fees for Legal Services,” Rule 4-200, under California’s Rules of Professional Conduct no longer includes that unintentionally risible ‘shock and awe’ language. It was the old Rule 2-107 that had the ‘shock the conscience’ test.
The reasonableness of lawyer fees was on my mind last week on hearing about a La Jolla, California lawyer who allegedly helped himself to more than half a million dollars from the estates of two deceased clients. The lawyer says the fees were for legal services over a 9-year span. The California Bar has demurred and initiated disciplinary proceedings against the 76-year old lawyer.
From reports, it appears the lawyer’s problems stemmed from his having paid himself — without first obtaining the benedictions of the probate court. See Lawyer faces discipline over clients’ $500K | UTSanDiego.com Mobile
Interestingly, California ethics guru Attorney Diane Karpman wrote a few years ago in her California Bar Journal’s “Ethics Byte,” column that “Usually, the State Bar will not pursue an investigation when it’s solely a fee dispute.” That said, the fee complaint here was initiated by a charitable beneficiary who objected to the lawyer’s compensation.
A lot of moolah.
Half a million simoleons is a lot of money — for most people. Paraphrasing Everett Dirksen’s supposed quotation, a half a million here, a half a million there, “pretty soon you’re talking real money,”
But it’s not like California’s probate statute doesn’t already allow lawyers to collect what everyday folks would call more than ‘reasonable’ fees for routine fill-in-the-forms work. Here’s a for instance. A comparatively modest, especially in California, $400,00 estate — basically the gross value of a house — even if it’s upside-down, and a non-fancy car, and nominal personal property generates a cool $11,000 in lawyer fees. No wonder the revocable living trust peddlers still clang that dinner bell.
California probate fees add up quickly when the statutory formula sets percentage fees according to the size of the gross estate. It’s 4% of the first $100,000; 3% on the next $100,000; 2% of the next $800,000; 1% of the next $900,000; and one-half percent of the next $15 million. For all amounts above $25 million, the court decides what’s “a reasonable amount.”
And those are the fees for garden-variety uncomplicated probates. It’s another matter entirely when it comes to what probate courts might allow lawyers for so-called “extraordinary services.”
Eye of the beholder.
In her ethics column, Ms. Karpman also commented on an attorneys’ fee dispute concerning approximately $7.5 million dollars, which was heard by the California First District Court of Appeal. It was the case of Cotchett, Pitre & McCarthy v. Universal Paragon Corp. (Cal. App. 1 Dist. 2010)
The law firm was hired to handle what was described as complex litigation. The appellate court held that since the litigation was so complicated and the protracted fee negotiations between the attorneys and the client reflected an attempt by “equally matched parties” to share the risk of that complex litigation, it was not unconscionable that the contingency fee agreement was based on the value of the client’s higher presettlement damages estimate and not the much lower actual settlement value.
The bottom line was that the court affirmed the superior court judgment confirming the arbitrator’s multi-million dollar fee award. And no never mind that the attorneys’ fee award exceeded the value of the client’s settlement. For even more about the case, see lawyer ethics expert Carol Langford’s column, “Money, Money, Money.”
All of which gets me to the final point. Ultimately, the reasonableness of attorney’s fees is like beauty — in the eye of the beholder. Or as a friend of mine used to say, “in the eye of the beer-holder.”
 SCOCAL, Tarver v. State Bar , 37 Cal.3d 122 available at: (http://scocal.stanford.edu/opinion/tarver-v-state-bar-30732) (last visited Saturday September 21, 2013).
Photo Credits: “best look of shock and awe ever. period.” by Mike Dunbar at Flickr via Creative Commons-license requiring attribution; “Will Rogers,” Wikipedia Commons, public domain; “Finance,” by Alan Cleaver at Flickr via Creative Commons-license requiring attribution;”Beer Holders,” by Jo Jakeman at Flickr via Creative Commons-license requiring attribution.